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Share Name | Share Symbol | Market | Type |
---|---|---|---|
Advanced Disposal Services Inc | NYSE:ADSW | NYSE | Common Stock |
Price Change | % Change | Share Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|
0.00 | 0.00% | 30.30 | 0 | 01:00:00 |
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☒
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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☐
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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|
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Delaware
|
|
90-0875845
|
(State or other jurisdiction
of incorporation)
|
|
(IRS Employer
Identification No.)
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|
Title of each class
|
|
Trading symbol
|
|
Name of each exchange on which registered
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Common Stock, $0.01 par value
|
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ADSW
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New York Stock Exchange
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Large accelerated filer
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☒
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Accelerated filer
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☐
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Non-accelerated filer
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☐
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Smaller reporting company
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☐
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Emerging growth company
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☐
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|
•
|
Significant public health crises, epidemics or pandemics, including the novel strain of coronavirus (“COVID-19”), may adversely affect our business, results of operations and financial condition;
|
•
|
our ability to achieve future profitability will depend on us executing our strategy and controlling costs;
|
•
|
future results may be impacted by the expiration of net operating losses (NOLs);
|
•
|
our tax position may be affected by recent changes in U.S. tax law;
|
•
|
operating in a highly competitive industry and the inability to compete effectively with larger and better capitalized companies and governmental service providers;
|
•
|
our results are vulnerable to economic conditions;
|
•
|
we may lose contracts through competitive bidding, early termination or governmental action;
|
•
|
some of our customers, including governmental entities, have suffered financial difficulties affecting their credit risk, which could negatively impact our operating results;
|
•
|
our financial and operating performance may be affected by the inability, in some instances, to renew or expand existing landfill permits or acquire new landfills. Further, the cost of operation and/or future construction of our existing landfills may become economically unfeasible causing us to abandon or cease operations;
|
•
|
we could be precluded from maintaining permits or entering into certain contracts if we are unable to obtain sufficient third-party financial assurance or adequate insurance coverage;
|
•
|
our accruals for our landfill site closure, post-closure and contamination related costs may be inadequate;
|
•
|
our cash flow may not be sufficient to finance our high level of capital expenditures;
|
•
|
our acquisitions, including our ability to integrate acquired businesses, or that acquired businesses may have unexpected risks or liabilities;
|
•
|
the seasonal nature of our business and "event-driven" waste projects that could cause our results to fluctuate;
|
•
|
adverse and destructive weather conditions that could result in higher fuel costs, higher labor costs, reduced municipal contract productivity and higher disposal costs;
|
•
|
we may be subject in the normal course of business to judicial, administrative or other third-party proceedings that could interrupt or limit our operations, result in adverse judgments, settlements or fines and create negative publicity;
|
•
|
fuel supply and prices may fluctuate significantly and we may not be able to pass on cost increases to our customers;
|
•
|
fluctuations in the prices of commodities may adversely affect our financial condition, results of operations and cash flows;
|
•
|
increases in labor and disposal costs and related transportation costs could adversely impact our financial results;
|
•
|
efforts by labor unions could divert management attention and adversely affect operating results;
|
•
|
we depend significantly on the services of the members of our senior, regional and local management teams, and the departure of any of those persons could cause our operating results to suffer;
|
•
|
we are increasingly dependent on technology in our operations and, if our technology fails, our business could be adversely affected;
|
•
|
a cybersecurity incident could negatively impact our business and our relationships with customers;
|
•
|
operational and safety risks, including the risk of personal injury to employees and others;
|
•
|
we are subject to substantial governmental regulation and failure to comply with these requirements, as well as enforcement actions and litigation arising from an actual or perceived breach of such requirements, could subject us to fines, penalties and judgments, and impose limits on our ability to operate and expand;
|
•
|
our operations being subject to environmental, health and safety laws and regulations, as well as contractual obligations that may result in significant liabilities;
|
•
|
future changes in laws or renewed enforcement of laws regulating the flow of solid waste in interstate commerce could adversely affect our operating results;
|
•
|
fundamental change in the waste management industry as traditional waste streams are increasingly viewed as renewable resources and changes in laws and environmental policies may limit the items that enter the waste stream, any of which may adversely impact volumes and tipping fees at our landfills. Alternatives to landfill disposal may cause our revenues and operating results to decline;
|
•
|
risks associated with our substantial indebtedness and working capital deficit;
|
•
|
risks associated with our ability to implement our growth strategy as and when planned; and
|
•
|
the other risks described in the "Risk Factors" section of our 2019 Annual Report on Form 10-K and in Part II Item 1A, of this quarterly report on Form 10-Q.
|
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||
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Item 1.
|
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||
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||
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||
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||
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Item 2.
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||
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Item 3.
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||
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Item 4.
|
||
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||
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|
|
Item 1.
|
||
|
|
|
Item 1A.
|
||
|
|
|
Item 2.
|
||
|
|
|
Item 3.
|
||
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|
|
Item 4.
|
||
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|
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Item 5.
|
||
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|
|
Item 6.
|
||
|
|
|
|
(in millions, except share data)
|
March 31,
2020 |
|
December 31,
2019 |
||||
Assets
|
|
|
|
||||
Current assets
|
|
|
|
||||
Cash and cash equivalents
|
$
|
31.0
|
|
|
$
|
12.5
|
|
Accounts receivable, net of allowance for doubtful accounts of $5.0 and $4.5, respectively
|
192.8
|
|
|
208.3
|
|
||
Prepaid expenses and other current assets
|
43.0
|
|
|
44.0
|
|
||
Total current assets
|
266.8
|
|
|
264.8
|
|
||
Other assets
|
52.3
|
|
|
53.3
|
|
||
Property and equipment, net of accumulated depreciation of $1,771.6 and $1,720.7, respectively
|
1,753.2
|
|
|
1,767.6
|
|
||
Goodwill
|
1,224.8
|
|
|
1,224.8
|
|
||
Other intangible assets, net of accumulated amortization of $325.8 and $318.1, respectively
|
225.2
|
|
|
233.0
|
|
||
Total assets
|
$
|
3,522.3
|
|
|
$
|
3,543.5
|
|
Liabilities and Stockholders' Equity
|
|
|
|
||||
Current liabilities
|
|
|
|
||||
Accounts payable
|
$
|
101.3
|
|
|
$
|
120.7
|
|
Accrued expenses
|
123.9
|
|
|
124.5
|
|
||
Deferred revenue
|
67.7
|
|
|
71.3
|
|
||
Current maturities of landfill retirement obligations
|
16.6
|
|
|
28.0
|
|
||
Current maturities of long-term debt
|
87.4
|
|
|
76.1
|
|
||
Total current liabilities
|
396.9
|
|
|
420.6
|
|
||
Other long-term liabilities
|
81.1
|
|
|
82.7
|
|
||
Long-term debt, less current maturities
|
1,779.8
|
|
|
1,792.1
|
|
||
Accrued landfill retirement obligations, less current maturities
|
253.1
|
|
|
236.2
|
|
||
Deferred income taxes
|
87.4
|
|
|
88.5
|
|
||
Total liabilities
|
2,598.3
|
|
|
2,620.1
|
|
||
Equity
|
|
|
|
||||
Common stock: $.01 par value, 1,000,000,000 shares authorized, 90,277,701 and 89,836,069 issued including shares held in treasury, respectively
|
0.9
|
|
|
0.9
|
|
||
Treasury stock at cost, 178,540 and 132,930 shares, respectively
|
(5.6
|
)
|
|
(4.1
|
)
|
||
Additional paid-in capital
|
1,535.7
|
|
|
1,527.7
|
|
||
Accumulated deficit
|
(604.4
|
)
|
|
(598.1
|
)
|
||
Accumulated other comprehensive loss
|
(2.6
|
)
|
|
(3.0
|
)
|
||
Total stockholders' equity
|
924.0
|
|
|
923.4
|
|
||
Total liabilities and stockholders' equity
|
$
|
3,522.3
|
|
|
$
|
3,543.5
|
|
(in millions, except share and per share data)
|
Three Months Ended March 31,
|
||||||
|
2020
|
|
2019
|
||||
|
|
|
|
||||
Service revenues
|
$
|
386.7
|
|
|
$
|
384.0
|
|
Operating costs and expenses
|
|
|
|
||||
Operating (exclusive of items shown separately below)
|
257.3
|
|
|
249.6
|
|
||
Selling, general and administrative
|
51.0
|
|
|
49.7
|
|
||
Depreciation and amortization
|
64.6
|
|
|
65.9
|
|
||
Acquisition and development costs
|
—
|
|
|
0.7
|
|
||
Loss on disposal of assets and asset impairments
|
0.1
|
|
|
0.2
|
|
||
Total operating costs and expenses
|
373.0
|
|
|
366.1
|
|
||
Operating income
|
13.7
|
|
|
17.9
|
|
||
Other (expense) income
|
|
|
|
||||
Interest expense
|
(22.6
|
)
|
|
(26.0
|
)
|
||
Other income, net
|
0.6
|
|
|
0.7
|
|
||
Total other expense
|
(22.0
|
)
|
|
(25.3
|
)
|
||
Loss before income taxes
|
(8.3
|
)
|
|
(7.4
|
)
|
||
Income tax benefit
|
(2.0
|
)
|
|
(1.4
|
)
|
||
Net loss
|
$
|
(6.3
|
)
|
|
$
|
(6.0
|
)
|
|
|
|
|
||||
Net loss attributable to common stockholders per share
|
|
|
|
||||
Basic loss per share
|
$
|
(0.07
|
)
|
|
$
|
(0.07
|
)
|
Diluted loss per share
|
$
|
(0.07
|
)
|
|
$
|
(0.07
|
)
|
Basic average shares outstanding
|
90,059,917
|
|
|
88,721,612
|
|
||
Diluted average shares outstanding
|
90,059,917
|
|
|
88,721,612
|
|
(in millions)
|
Three Months Ended March 31,
|
||||||
|
2020
|
|
2019
|
||||
|
|
|
|
||||
Net loss
|
$
|
(6.3
|
)
|
|
$
|
(6.0
|
)
|
Change in fair value of interest rate caps, net of tax for the three months ended March 31, 2020 and 2019 of ($0.1) and 0.8, respectively
|
0.4
|
|
|
(2.0
|
)
|
||
Comprehensive loss
|
$
|
(5.9
|
)
|
|
$
|
(8.0
|
)
|
|
|
|
|
|
|
|
|
|
Additional Paid-In Capital
|
|
Accumulated Deficit
|
|
Accumulated
Other Comprehensive (Loss) Income |
|
Total Stockholders' Equity
|
||||||||||||||
(in millions, except share data)
|
Common Stock
|
|
Treasury Stock
|
|
|
|
|
||||||||||||||||||||||
|
Shares
|
|
Amount
|
|
Shares
|
|
Amount
|
|
|
|
|
||||||||||||||||||
Balance at December 31, 2018
|
88,685,920
|
|
|
$
|
0.9
|
|
|
2,274
|
|
|
$
|
—
|
|
|
$
|
1,501.7
|
|
|
$
|
(591.1
|
)
|
|
$
|
—
|
|
|
$
|
911.5
|
|
Net loss
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(6.0
|
)
|
|
—
|
|
|
(6.0
|
)
|
||||||
Stock-based compensation
|
18,735
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
4.1
|
|
|
—
|
|
|
—
|
|
|
4.1
|
|
||||||
Stock option exercises
|
90,807
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1.9
|
|
|
—
|
|
|
—
|
|
|
1.9
|
|
||||||
Unrealized loss resulting from change in fair value of derivative instruments, net of tax of $0.8
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(2.0
|
)
|
|
$
|
(2.0
|
)
|
|||||
Impact of implementing new derivatives standard, net of tax of ($0.2)
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(0.4
|
)
|
|
0.4
|
|
|
$
|
—
|
|
|||||
Balance at March 31, 2019
|
88,795,462
|
|
|
$
|
0.9
|
|
|
2,274
|
|
|
$
|
—
|
|
|
$
|
1,507.7
|
|
|
$
|
(597.5
|
)
|
|
$
|
(1.6
|
)
|
|
$
|
909.5
|
|
(in millions)
|
Three Months Ended March 31,
|
||||||
|
2020
|
|
2019
|
||||
Cash flows from operating activities
|
|
|
|
||||
Net loss
|
$
|
(6.3
|
)
|
|
$
|
(6.0
|
)
|
Adjustments to reconcile net loss to net cash provided by operating activities
|
|
|
|
||||
Depreciation and amortization
|
64.6
|
|
|
65.9
|
|
||
Change in fair value of derivative instruments
|
—
|
|
|
2.5
|
|
||
Amortization of debt issuance costs and original issue discount
|
1.5
|
|
|
1.3
|
|
||
Accretion on landfill retirement obligations
|
4.5
|
|
|
4.4
|
|
||
Other accretion and amortization
|
1.8
|
|
|
1.5
|
|
||
Provision for doubtful accounts
|
2.2
|
|
|
1.1
|
|
||
Loss on disposition of property and equipment
|
0.1
|
|
|
0.2
|
|
||
Stock based compensation
|
1.6
|
|
|
4.1
|
|
||
Deferred tax benefit
|
(1.3
|
)
|
|
(1.6
|
)
|
||
Earnings in equity investee
|
(0.5
|
)
|
|
(0.8
|
)
|
||
Changes in operating assets and liabilities, net of businesses acquired
|
|
|
|
||||
Decrease in accounts receivable
|
13.4
|
|
|
5.9
|
|
||
Decrease (increase) in prepaid expenses and other current assets
|
1.1
|
|
|
(0.1
|
)
|
||
Decrease in other assets
|
0.6
|
|
|
1.9
|
|
||
(Decrease) increase in accounts payable
|
(7.1
|
)
|
|
2.9
|
|
||
Decrease in accrued expenses
|
(2.1
|
)
|
|
(1.0
|
)
|
||
Decrease in deferred revenue
|
(3.6
|
)
|
|
(1.2
|
)
|
||
Decrease in other long-term liabilities
|
(2.1
|
)
|
|
(4.8
|
)
|
||
Capping, closure and post-closure obligations
|
(3.7
|
)
|
|
(3.7
|
)
|
||
Net cash provided by operating activities
|
64.7
|
|
|
72.5
|
|
||
Cash flows from investing activities
|
|
|
|
||||
Purchases of property and equipment and construction and development
|
(47.1
|
)
|
|
(32.5
|
)
|
||
Proceeds from sale of property and equipment and insurance recoveries
|
0.3
|
|
|
1.0
|
|
||
Acquisition of businesses, net of cash acquired
|
—
|
|
|
(26.1
|
)
|
||
Net cash used in investing activities
|
(46.8
|
)
|
|
(57.6
|
)
|
||
Cash flows from financing activities
|
|
|
|
||||
Proceeds from borrowings on debt instruments
|
65.0
|
|
|
58.0
|
|
||
Repayment on debt instruments, including finance leases
|
(70.8
|
)
|
|
(74.0
|
)
|
||
Proceeds from stock option exercises net of stock repurchases
|
6.4
|
|
|
1.9
|
|
||
Net cash provided by (used in) financing activities
|
0.6
|
|
|
(14.1
|
)
|
||
Net increase in cash and cash equivalents
|
18.5
|
|
|
0.8
|
|
||
Cash and cash equivalents, beginning of period
|
12.5
|
|
|
6.8
|
|
||
Cash and cash equivalents, end of period
|
$
|
31.0
|
|
|
$
|
7.6
|
|
1.
|
Business Operations
|
•
|
Reducing or eliminating face-to-face interactions with its employees;
|
•
|
Executing on enhanced protocols to keep vehicles, common areas, and offices extra clean;
|
•
|
Procuring additional personal protective equipment including masks, gloves, hand sanitizer, and cleaning solutions;
|
•
|
Reallocating resources, reducing overtime, and parking surplus equipment to reduce operating costs;
|
•
|
Rerouting where needed to maximize productivity and meet customer needs;
|
•
|
Flexing capital spending while still meeting business needs;
|
•
|
Significantly reducing travel and discretionary spending; and
|
•
|
Maintaining higher target cash balances and as of March 31, 2020 able to access $227.7 million of additional liquidity from its revolving credit facility supported by a diverse group of lenders.
|
2.
|
Basis of Presentation
|
3.
|
Revenue Recognition
|
4.
|
Landfill Liabilities
|
Balance at December 31, 2018
|
$
|
248.0
|
|
Increase in retirement obligation
|
11.0
|
|
|
Accretion of closure and post-closure costs
|
18.0
|
|
|
Asset retirement obligation adjustments
|
6.9
|
|
|
Costs incurred
|
(19.7
|
)
|
|
Balance at December 31, 2019
|
264.2
|
|
|
Increase in retirement obligation
|
2.5
|
|
|
Accretion of closure and post-closure costs
|
4.5
|
|
|
Costs incurred
|
(1.5
|
)
|
|
Balance at March 31, 2020
|
269.7
|
|
|
Less: Current portion
|
(16.6
|
)
|
|
|
$
|
253.1
|
|
|
|
Three Months Ended March 31,
|
||||||
|
|
2020
|
|
2019
|
||||
Numerator:
|
|
|
|
|
|
|
||
|
Net loss
|
$
|
(6.3
|
)
|
|
$
|
(6.0
|
)
|
Denominator:
|
|
|
|
|
||||
|
Average common shares outstanding
|
90,059,917
|
|
|
88,721,612
|
|
||
|
Other potentially dilutive common shares
|
—
|
|
|
—
|
|
||
|
Average common shares outstanding, assuming dilution
|
90,059,917
|
|
|
88,721,612
|
|
||
|
|
|
|
|
|
|
||
|
Basic net loss per share
|
$
|
(0.07
|
)
|
|
$
|
(0.07
|
)
|
|
Diluted net loss per share
|
$
|
(0.07
|
)
|
|
$
|
(0.07
|
)
|
6.
|
Debt
|
|
March 31,
2020 |
|
December 31,
2019 |
||||
Revolving line of credit with lenders (Revolver), interest at applicable rate plus margin, as defined (4.27% and 5.43% at March 31, 2020 and December 31, 2019, respectively) due quarterly; balance due at maturity in November 2021
|
$
|
44.0
|
|
|
$
|
30.0
|
|
Term loans (Term Loan B); quarterly payments of $3.75 commencing March 31, 2017 through September 30, 2023 with final payment due November 10, 2023; interest at an alternate base rate or adjusted LIBOR rate with a 0.75% floor plus an applicable margin
|
1,361.7
|
|
|
1,372.5
|
|
||
Senior notes (Senior Notes) payable; interest at 5.625% payable in arrears semi-annually commencing May 15, 2017; maturing on November 15, 2024
|
425.0
|
|
|
425.0
|
|
||
Finance lease obligations, maturing through 2024
|
47.4
|
|
|
52.6
|
|
||
Other debt
|
7.8
|
|
|
8.1
|
|
||
|
1,885.9
|
|
|
1,888.2
|
|
||
Less: Original issue discount and debt issuance costs classified as a reduction to long-term debt
|
(18.7
|
)
|
|
(20.0
|
)
|
||
Less: Current portion
|
(87.4
|
)
|
|
(76.1
|
)
|
||
|
$
|
1,779.8
|
|
|
$
|
1,792.1
|
|
|
|
Balance Sheet Location
|
|
March 31, 2020
|
|
December 31,
2019 |
||||
Derivatives Designated as Hedging Instruments
|
|
|
|
|
|
|
|
|
||
2017 Interest rate caps
|
|
Accrued expenses
|
|
(2.4
|
)
|
|
(2.4
|
)
|
||
2017 Interest rate caps
|
|
Other long-term liabilities
|
|
(1.2
|
)
|
|
(1.7
|
)
|
||
Total derivatives
|
|
|
|
$
|
(3.6
|
)
|
|
$
|
(4.1
|
)
|
|
Service
Revenues |
|
Operating
Income (Loss) |
|
Depreciation
and Amortization |
||||||
|
|
|
|
|
|
||||||
Three Months Ended March 31, 2020
|
|
|
|
|
|
||||||
South
|
$
|
162.2
|
|
|
$
|
21.7
|
|
|
$
|
22.5
|
|
East
|
93.8
|
|
|
1.2
|
|
|
18.8
|
|
|||
Midwest
|
130.7
|
|
|
10.4
|
|
|
21.9
|
|
|||
Corporate
|
—
|
|
|
(19.6
|
)
|
|
1.4
|
|
|||
|
$
|
386.7
|
|
|
$
|
13.7
|
|
|
$
|
64.6
|
|
|
|
|
|
|
|
||||||
Three Months Ended March 31, 2019
|
|
|
|
|
|
||||||
South
|
$
|
159.9
|
|
|
$
|
24.0
|
|
|
$
|
22.7
|
|
East
|
94.9
|
|
|
1.7
|
|
|
19.2
|
|
|||
Midwest
|
129.2
|
|
|
13.9
|
|
|
22.9
|
|
|||
Corporate
|
—
|
|
|
(21.7
|
)
|
|
1.1
|
|
|||
|
$
|
384.0
|
|
|
$
|
17.9
|
|
|
$
|
65.9
|
|
|
|
Three Months Ended March 31,
|
||||||
|
|
2020
|
|
2019
|
||||
Residential Collection Revenue
|
|
$
|
105.9
|
|
|
$
|
100.7
|
|
Commercial Collection Revenue
|
|
100.3
|
|
|
97.9
|
|
||
Rolloff Collection Revenue
|
|
62.3
|
|
|
62.3
|
|
||
Disposal Revenue
|
|
58.0
|
|
|
60.8
|
|
||
Fuel and Environmental Charges
|
|
26.2
|
|
|
27.6
|
|
||
Sale of Recyclables
|
|
2.1
|
|
|
3.1
|
|
||
Other Revenue
|
|
31.9
|
|
|
31.6
|
|
||
|
|
$
|
386.7
|
|
|
$
|
384.0
|
|
|
|
|
Fair Value Measurement at March 31, 2020
Reporting Date Using |
||||||||||||
|
Total
|
|
Quoted Prices
in Active Markets for Identical Assets (Level 1) |
|
Significant
Other Observable Inputs (Level 2) |
|
Carrying
Value |
||||||||
|
|
|
|
|
|
|
|
||||||||
Recurring fair value measurements
|
|
|
|
|
|
|
|
||||||||
Cash and cash equivalents
|
$
|
31.0
|
|
|
$
|
31.0
|
|
|
$
|
—
|
|
|
$
|
31.0
|
|
Interest rate caps - liability position
|
(3.6
|
)
|
|
—
|
|
|
(3.6
|
)
|
|
(3.6
|
)
|
||||
Total recurring fair value measurements
|
$
|
27.4
|
|
|
$
|
31.0
|
|
|
$
|
(3.6
|
)
|
|
$
|
27.4
|
|
|
|
|
|
|
|
|
|
||||||||
|
|
|
Fair Value Measurement at December 31, 2019
Reporting Date Using |
||||||||||||
|
Total
|
|
Quoted Prices
in Active Markets for Identical Assets (Level 1) |
|
Significant
Other Observable Inputs (Level 2) |
|
Carrying
Value |
||||||||
|
|
|
|
|
|
|
|
||||||||
Recurring fair value measurements
|
|
|
|
|
|
|
|
||||||||
Cash and cash equivalents
|
$
|
12.5
|
|
|
$
|
12.5
|
|
|
$
|
—
|
|
|
$
|
12.5
|
|
Interest rate caps - liability position
|
(4.1
|
)
|
|
$
|
—
|
|
|
(4.1
|
)
|
|
(4.1
|
)
|
|||
Total recurring fair value measurements
|
$
|
8.4
|
|
|
$
|
12.5
|
|
|
$
|
(4.1
|
)
|
|
$
|
8.4
|
|
|
March 31,
2020 |
|
December 31,
2019 |
||||
Revolver
|
$
|
44.0
|
|
|
$
|
30.0
|
|
Senior Notes
|
431.4
|
|
|
443.4
|
|
||
Term Loan B
|
1,348.1
|
|
|
1,379.4
|
|
||
|
$
|
1,823.5
|
|
|
$
|
1,852.8
|
|
•
|
Reducing or eliminating face-to-face interactions with our employees;
|
•
|
Executing on enhanced protocols to keep vehicles, common areas, and offices extra clean;
|
•
|
Procuring additional personal protective equipment including masks, gloves, hand sanitizer, and cleaning solutions;
|
•
|
Reallocating resources, reducing overtime, and parking surplus equipment to reduce operating costs;
|
•
|
Rerouting where needed to maximize productivity and meet customer needs;
|
•
|
Flexing capital spending while still meeting business needs;
|
•
|
Significantly reducing travel and discretionary spending; and
|
•
|
Maintaining higher target cash balances and as of March 31, 2020 able to access $227.7 million of additional liquidity from our revolving credit facility supported by a diverse group of lenders.
|
|
Three Months Ended March 31,
|
||||||||||||
|
2020
|
|
2019
|
||||||||||
Service revenues
|
$
|
386.7
|
|
|
100.0
|
%
|
|
$
|
384.0
|
|
|
100.0
|
%
|
Operating costs and expenses
|
|
|
|
|
|
|
|
||||||
Operating
|
252.8
|
|
|
65.4
|
%
|
|
245.2
|
|
|
63.9
|
%
|
||
Accretion of landfill retirement obligations
|
4.5
|
|
|
1.1
|
%
|
|
4.4
|
|
|
1.1
|
%
|
||
Operating expenses
|
257.3
|
|
|
66.5
|
%
|
|
249.6
|
|
|
65.0
|
%
|
||
Selling, general and administrative
|
51.0
|
|
|
13.2
|
%
|
|
49.7
|
|
|
12.9
|
%
|
||
Depreciation and amortization
|
64.6
|
|
|
16.7
|
%
|
|
65.9
|
|
|
17.2
|
%
|
||
Acquisition and development costs
|
—
|
|
|
—
|
%
|
|
0.7
|
|
|
0.1
|
%
|
||
Loss on disposal of assets and asset impairments
|
0.1
|
|
|
0.1
|
%
|
|
0.2
|
|
|
0.1
|
%
|
||
Total operating costs and expenses
|
373.0
|
|
|
96.5
|
%
|
|
366.1
|
|
|
95.3
|
%
|
||
Operating income
|
$
|
13.7
|
|
|
3.5
|
%
|
|
$
|
17.9
|
|
|
4.7
|
%
|
|
Three Months Ended March 31,
|
||||||||||||
|
2020
|
|
2019
|
||||||||||
Collection
|
$
|
268.4
|
|
|
69.4
|
%
|
|
$
|
268.1
|
|
|
69.8
|
%
|
Disposal
|
123.2
|
|
|
31.9
|
%
|
|
127.0
|
|
|
33.1
|
%
|
||
Sale of recyclables
|
2.8
|
|
|
0.7
|
%
|
|
3.5
|
|
|
0.9
|
%
|
||
Fuel and environmental charges
|
27.5
|
|
|
7.1
|
%
|
|
28.9
|
|
|
7.5
|
%
|
||
Other revenue
|
35.8
|
|
|
9.3
|
%
|
|
27.8
|
|
|
7.2
|
%
|
||
Intercompany eliminations
|
(71.0
|
)
|
|
(18.4
|
)%
|
|
(71.3
|
)
|
|
(18.5
|
)%
|
||
Total service revenues
|
$
|
386.7
|
|
|
100.0
|
%
|
|
$
|
384.0
|
|
|
100.0
|
%
|
|
Three Months Ended March 31,
|
||||
|
2020
|
|
2019
|
||
Average yield
|
3.6
|
%
|
|
4.1
|
%
|
Recycling
|
(0.2
|
)%
|
|
(0.2
|
)%
|
Fuel surcharge revenue
|
(0.3
|
)%
|
|
0.3
|
%
|
Total yield
|
3.1
|
%
|
|
4.2
|
%
|
Organic volume
|
(2.9
|
)%
|
|
(0.3
|
)%
|
Acquisitions
|
0.5
|
%
|
|
1.4
|
%
|
Total revenue growth
|
0.7
|
%
|
|
5.3
|
%
|
•
|
Average yield increased revenue by 3.6% or $13.8 driven by higher open market price yield as we continue to focus on disciplined pricing and higher price yield in our municipal residential collection business due to the positive impact of higher CPI contract resets;
|
•
|
Recycling revenue decreased revenue by 0.2% or $0.8 due to a continued decrease in recycling commodity prices;
|
•
|
Fuel surcharge revenue decreased revenue by 0.3% or $1.2 due to a decrease in diesel fuel prices. These charges fluctuate in response to changes in prices for diesel fuel on which the surcharge is based and, consequently, any decrease in fuel prices results in a decrease in our revenue. Our fuel surcharges reset on a monthly basis therefore a decrease in our fuel surcharge revenue is delayed in comparison to the decrease in our fuel expense when diesel fuel prices decrease;
|
•
|
Organic volume decreased revenue by 2.9% or $11.1 due to the following: lower disposal revenue of $5.8 due to the loss of certain disposal volumes in the Midwest and the cycling of strong prior year special waste and construction and demolition volumes; lower rolloff collection, commercial collection and disposal volumes of $5.0 due to the impacts of COVID-19 across all regions; lower rolloff collection volume of $2.0 due to the loss of industrial contracts and lower special waste volumes in the South region; lower commercial collection volume of $1.3 due to the loss of certain contracts; and lower third party trucking revenue of $1.1 in the East region. The decrease was partially offset by an increase in residential volumes of $2.7 primarily due to a new contract win in the South and the impact of $2.0 related to one extra company workday during the three months ended March 31, 2020 compared to the three months ended March 31, 2019;
|
•
|
Acquisitions increased revenue by 0.5% or $1.9 due to the completion of acquisitions during the three months ended March 31, 2019 that further enhance our vertical integration strategy.
|
•
|
Labor and related benefits, which consist of salaries and wages, health and welfare benefits, incentive compensation and payroll taxes;
|
•
|
Transfer and disposal costs which include tipping fees paid to third-party disposal facilities and transfer stations as well as transportation and subcontractor costs (which include costs for independent haulers who transport waste from transfer stations to our disposal facilities and costs for local operators who provide waste handling services associated with markets outside our standard operating areas);
|
•
|
Maintenance and repairs expenses which include labor, maintenance and repairs to our vehicles, equipment and containers;
|
•
|
Fuel costs which include the direct cost of fuel used by our vehicles, net of fuel tax credits;
|
•
|
Franchise and host fees which consist of municipal franchise fees not paid to customers, host community fees and royalties;
|
•
|
Risk management expenses which include casualty insurance premiums, claims payments, estimates for claims incurred but not reported and casualty losses;
|
•
|
Other expenses which include expenses such as facility operating costs, equipment rent, leachate and sulfate treatment and disposal and other landfill maintenance costs;
|
•
|
Accretion expense related to landfill capping, closure and post-closure is included in operating expenses in our condensed consolidated statement of operations, but it is excluded from the table below (refer to “Accretion of Landfill Retirement Obligations” below for a detailed discussion of the changes in amounts).
|
|
Three Months Ended March 31,
|
||||||||||||
|
2020
|
|
2019
|
||||||||||
|
|
|
|
|
|
|
|
||||||
Labor and related benefits
|
$
|
90.1
|
|
|
23.3
|
%
|
|
$
|
85.7
|
|
|
22.3
|
%
|
Transfer and disposal costs
|
52.4
|
|
|
13.6
|
%
|
|
50.2
|
|
|
13.1
|
%
|
||
Maintenance and repairs
|
40.5
|
|
|
10.5
|
%
|
|
39.8
|
|
|
10.4
|
%
|
||
Fuel
|
16.5
|
|
|
4.3
|
%
|
|
18.9
|
|
|
4.9
|
%
|
||
Franchise and host fees
|
8.8
|
|
|
2.3
|
%
|
|
9.3
|
|
|
2.4
|
%
|
||
Risk management
|
10.3
|
|
|
2.7
|
%
|
|
9.4
|
|
|
2.4
|
%
|
||
Other
|
34.2
|
|
|
8.7
|
%
|
|
31.9
|
|
|
8.4
|
%
|
||
Total operating expenses, excluding accretion expense
|
$
|
252.8
|
|
|
65.4
|
%
|
|
$
|
245.2
|
|
|
63.9
|
%
|
•
|
Labor and related benefits increased by $4.4 or 5.1% to $90.1 which was primarily attributable to higher labor costs as a result of merit increases, increased medical insurance claims, increased labor demands associated with a new municipal contract win in the South region and the impact of one extra workday during the first quarter 2020 compared to the first quarter 2019;
|
•
|
Transfer and disposal costs increased by $2.2 or 4.4% to $52.4 primarily due to a significant increase in processing costs related to single stream recycling, an increase in third-party transportation costs in our Midwest segment as a result of diverting waste from one of our landfills that is currently building a new cell and the impact of one extra workday during the first quarter 2020 compared to the first quarter 2019. The increase was partially offset by lower third party disposal costs as a result of reduced container weights resulting from the impact of COVID-19;
|
•
|
Maintenance and repairs expense increased by $0.7 or 1.8% to $40.5 primarily due to merit increases and the impact of one extra workday during the first quarter 2020 compared to the first quarter 2019;
|
•
|
Fuel costs decreased $2.4 or 12.7% to $16.5 as a result of lower diesel fuel costs per gallon partially offset by the impact of one extra workday during the first quarter 2020 compared to the first quarter 2019;
|
•
|
Franchise and host fees decreased $0.5 or 5.4% to $8.8 primarily due to lower landfill host fees due to the loss of certain disposal volumes in the Midwest, the cycling of strong prior year special waste and construction and demolition volumes and lower disposal weights resulting from the impact of COVID-19;
|
•
|
Risk management expense increased $0.9 or 9.6% to $10.3 primarily due to a lower discount rate (rates significantly declined in March, due to the impacts of COVID-19), used in the automobile and property liability actuarial analysis and due to higher loss experience associated with automobile and property liability claims;
|
•
|
Other operating costs increased $2.3 or 7.2% to $34.2 primarily due to higher leachate and gas treatment costs at several of our landfills partially due to weather related impacts and higher site maintenance costs at several facilities.
|
|
Three Months Ended March 31,
|
||||||||||||
|
2020
|
|
2019
|
||||||||||
|
|
|
|
|
|
|
|
||||||
Salaries
|
$
|
30.7
|
|
|
7.9
|
%
|
|
$
|
31.8
|
|
|
8.3
|
%
|
Legal and professional
|
5.0
|
|
|
1.3
|
%
|
|
4.2
|
|
|
1.1
|
%
|
||
Other
|
15.3
|
|
|
4.0
|
%
|
|
13.7
|
|
|
3.5
|
%
|
||
Total selling, general and administrative expenses
|
$
|
51.0
|
|
|
13.2
|
%
|
|
$
|
49.7
|
|
|
12.9
|
%
|
•
|
Our salaries expense decreased by $1.1 or 3.5% to $30.7 primarily due to lower stock based compensation expense partially offset by the impact of merit increases and higher bonus accruals due to the guaranteed bonus program adopted as part of the merger as further described in Note 12 to the unaudited consolidated financial statements.
|
•
|
Legal and professional fees increased $0.8 to $5.0 due to fees associated with the proposed merger as further described in Note 12 to the unaudited consolidated financial statements.
|
•
|
Other selling, general and administrative expenses increased $1.6 or 11.7% to $15.3 primarily due to higher bad debt expense as a result of anticipated write-offs due to COVID-19.
|
|
Three Months Ended March 31,
|
||||||||||||
|
2020
|
|
2019
|
||||||||||
|
|
|
|
|
|
|
|
||||||
Depreciation, amortization and depletion of property and equipment
|
$
|
56.9
|
|
|
14.7
|
%
|
|
$
|
58.1
|
|
|
15.1
|
%
|
Amortization of other intangible assets
|
7.7
|
|
|
2.0
|
%
|
|
7.8
|
|
|
2.1
|
%
|
||
Depreciation and amortization
|
$
|
64.6
|
|
|
16.7
|
%
|
|
$
|
65.9
|
|
|
17.2
|
%
|
|
Three Months Ended March 31,
|
||||||||||||
|
2020
|
|
2019
|
||||||||||
|
|
|
|
|
|
|
|
||||||
Depreciation and amortization of property and equipment
|
$
|
35.1
|
|
|
9.1
|
%
|
|
$
|
35.6
|
|
|
9.3
|
%
|
Landfill depletion and amortization
|
21.8
|
|
|
5.6
|
%
|
|
22.5
|
|
|
5.9
|
%
|
||
Depreciation, amortization and depletion of property and equipment
|
$
|
56.9
|
|
|
14.7
|
%
|
|
$
|
58.1
|
|
|
15.1
|
%
|
•
|
Depreciation and amortization of property and equipment decreased $0.5 or 1.4% to $35.1 due mainly to certain assets becoming fully depreciated;
|
•
|
Landfill depletion and amortization decreased $0.7 or 3.1% to $21.8 due to the loss of certain disposal volumes in the Midwest, the cycling of strong prior year special waste and construction and demolition volumes and lower disposal weights resulting from the impact of COVID-19;
|
|
Service
Revenues |
|
Operating
Income (Loss) |
|
Depreciation
and Amortization |
||||||
|
|
|
|
|
|
||||||
Three Months Ended March 31, 2020
|
|
|
|
|
|
||||||
South
|
$
|
162.2
|
|
|
$
|
21.7
|
|
|
$
|
22.5
|
|
East
|
93.8
|
|
|
1.2
|
|
|
18.8
|
|
|||
Midwest
|
130.7
|
|
|
10.4
|
|
|
21.9
|
|
|||
Corporate
|
—
|
|
|
(19.6
|
)
|
|
1.4
|
|
|||
|
$
|
386.7
|
|
|
$
|
13.7
|
|
|
$
|
64.6
|
|
|
|
|
|
|
|
|
|
|
|||
Three Months Ended March 31, 2019
|
|
|
|
|
|
||||||
South
|
$
|
159.9
|
|
|
$
|
24.0
|
|
|
$
|
22.7
|
|
East
|
94.9
|
|
|
1.7
|
|
|
19.2
|
|
|||
Midwest
|
129.2
|
|
|
13.9
|
|
|
22.9
|
|
|||
Corporate
|
—
|
|
|
(21.7
|
)
|
|
1.1
|
|
|||
|
$
|
384.0
|
|
|
$
|
17.9
|
|
|
$
|
65.9
|
|
|
March 31,
2020 |
|
December 31,
2019 |
||||
|
|
|
|
||||
Cash and cash equivalents
|
$
|
31.0
|
|
|
$
|
12.5
|
|
|
|
|
|
|
|
||
Debt:
|
|
|
|
||||
Current portion
|
87.4
|
|
|
76.1
|
|
||
Long-term portion
|
1,779.8
|
|
|
1,792.1
|
|
||
Total debt
|
$
|
1,867.2
|
|
|
$
|
1,868.2
|
|
|
Three months ended March 31,
|
||||||
|
2020
|
|
2019
|
||||
Net cash provided by operating activities
|
$
|
64.7
|
|
|
$
|
72.5
|
|
Net cash used in investing activities
|
$
|
(46.8
|
)
|
|
$
|
(57.6
|
)
|
Net cash provided by (used in) financing activities
|
$
|
0.6
|
|
|
$
|
(14.1
|
)
|
•
|
A decrease of $7.1 in accounts payable during the three months ended March 31, 2020 compared to an increase of $2.9 during the three months ended March 31, 2019, resulting in a negative variance of $10.0. The variance is primarily due to the timing of capital expenditure payments;
|
•
|
A decrease in net income of $4.4, after adjusting for non cash items;
|
•
|
A decrease of $13.4 in accounts receivable during the three months ended March 31, 2020 compared to a decrease of $5.9 during the three months ended March 31, 2019, resulting in a positive variance of $7.5. Days Sales Outstanding was 45 during the three months ended March 31, 2020 compared to 48 during the three months ended March 31. 2019.
|
•
|
A decrease of $26.1 in cash expenditures used to fund acquisitions;
|
•
|
Higher cash expenditures of $14.6 used to fund the purchase of previously committed property and equipment and landfill construction and development;
|
•
|
Lower proceeds of $0.7 from sale of property and equipment and insurance proceeds.
|
•
|
A decrease in net payments on debt instruments of $10.2 as we used excess cash to make debt prepayments during the three months ended March 31, 2020 compared to using the majority of our excess cash for acquisitions during the three months ended March 31, 2019;
|
•
|
An increase in proceeds from stock option exercises of $4.5.
|
Year
|
Percentage
|
|
2019
|
104.219
|
%
|
2020
|
102.813
|
%
|
2021
|
101.406
|
%
|
2022 and thereafter
|
100.000
|
%
|
|
|
|
|
||
|
|
|
|
||
|
|
|
|
||
|
|
|
|
||
|
|
|
Exhibit 101
|
|
Cover Page Interactive Data File - the cover page XBRL tags are embedded within the Inline XBRL document.
|
|
|
|
Exhibit 101.INS
|
|
XBRL Instance Document
|
|
|
|
Exhibit 101.SCH
|
|
XBRL Extension Schema Document
|
|
|
|
Exhibit 101.CAL
|
|
XBRL Taxonomy Extension Calculation Linkbase Document
|
|
|
|
Exhibit 101.DEF
|
|
XBRL Taxonomy Extension Definition Linkbase Document
|
|
|
|
Exhibit 101.LAB
|
|
XBRL Taxonomy Extension Label Linkbase Document
|
|
|
|
Exhibit 101.PRE
|
|
XBRL Taxonomy Extension Presentation Linkbase Document
|
|
|
|
Exhibit 104
|
|
The cover page from this Report on Form 10-Q, formatted as Inline XBRL.
|
May 7, 2020
|
|
|
|
Advanced Disposal Services, Inc.
|
||
|
|
|
|
|||
|
|
|
|
By:
|
|
/s/ Steven R. Carn
|
|
|
|
|
|
|
Steven R. Carn
|
|
|
|
|
|
|
Chief Financial Officer
|
1 Year Advanced Disposal Services Chart |
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